LONDON: The dollar steadied on Wednesday, with investors broadly taking a "wait-and-see" approach ahead of a US labour market report later in the week, which follows a European Central Bank policy meeting.
The greenback last week hit a two-month high against a basket of currencies, as hawkish comments from US Federal Reserve officials drove a dramatic revision of investors' expectations of a March hike, from around a 30 percent chance to around an 87 percent chance now.
But having rallied almost 2.5 percent over the past five weeks, the US currency is now sitting in a narrow range, with a rate increase next week seen essentially as a done deal, and Friday's non-farm payrolls report therefore seen as unlikely to move the dollar much.
It was flat against the basket on Wednesday at 101.89.
While the Fed looks set to hike rates for the third time in 18 months, the ECB looks likely to keep its monetary policy expansionary when it meets on Thursday, despite rising inflationary pressures.
The euro, which has fallen almost 5 percent against the dollar since the election of US President Donald Trump, inched down 0.1 percent on Wednesday to $1.0557, staying comfortably within the $1.0450-$1.0850 range its has traded in for the past two months.
"We're just waiting for tomorrow now - the ECB -and then after tomorrow we're going to be waiting for next week and the Fed," said DZ Bank currency strategist Sonja Marten, in Frankfurt.
"The ECB is the more interesting of the two, because with the Fed it's clear that they're going to hike rates," she said. "The inflation rate is finally rising (but)... my best guess is that (ECB President Mario) Draghi is going to succeed tomorrow to keep things on a fairly even keel."
The Swiss franc was little changed at 1.0135 per dollar after retreating to 1.0170 overnight, its weakest since Jan. 11, hurt by a rise in the Swiss National Bank's foreign exchange reserves, and statements from SNB Chairman Thomas Jordan that the franc was "significantly over-valued."
The dollar was also flat at 113.96 yen after rising modestly to 114.160 overnight.
The greenback has had a difficult time staying above the 114 yen threshold amid uncertainty about Washington's potentially protectionist trade stance. Trump's administration is expected to react should the dollar gain strongly against the currencies of major trade partners such as Germany, Japan and China.
Masafumi Yamamoto, chief forex strategist at Mizuho Securities in Tokyo, said coming events including the US Treasury's semi-annual currency report in April are events that "could push the trade theme to the fore" for the US administration.
Comments
Comments are closed.